Does corporate governance play a dynamic role in mitigating opportunistic transactions? Evidence from India

Nitya Nand Tripathi, Asha Binu Raj, Sudhakara Reddy Syamala and Aviral Kumar Tiwari

International Journal of Economic Policy in Emerging Economies, 2025, vol. 22, issue 1, 25-51

Abstract: This paper investigates the effect of corporate governance mechanism on various types of related party transactions (RPTs) in India. We examine whether the corporate governance mechanism helps to restrict the management's opportunistic behaviour of transferring resources from the company through RPTs or not. We find that the percentage of related party sales to total assets is between 6.4%-37.98% and the percentage of related party expenses to total assets is in the range of 4.4%-25.30% during the study period. Whereas, the percentage of loans given to related parties to total assets is between 5.0% to 26.0% and loans taken from related parties to total assets is 3.9% to 22.70%. The empirical findings show a negative relation between independent directors and RPTs. The findings can strategically facilitate the regulators to make necessary decisions which could strengthen the corporate governance mechanism to mitigate opportunistic transactions in terms of RPTs.

Keywords: corporate governance; related party transactions; audit committee; opportunistic transactions; corporate governance index; CGI; India. (search for similar items in EconPapers)
Date: 2025
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